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August 2008

A.P. (DIR Series) Circular No. 1, dated 11-7-2008 —Security for External Commercial Borrowings — Liberalisation.

By Pinky Shah, Sonalee Godbole, Gaurang Gandhi, Chartered Accountants
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Part C : RBI/FEMA


The Reserve Bank of India has issued 3 Circulars. The DIPP
has issued 1 Press Note.


60 A.P. (DIR Series) Circular No. 1, dated
11-7-2008 —Security for External Commercial Borrowings — Liberalisation.

Presently, RBI permission is required for creation of charge
on immovable assets, financial securities and issue of corporate or personal
guarantees, on behalf of the borrower in favour of the overseas lender, to
secure the ECB under automatic/approval route.

 

Through this circular RBI has delegated, subject to certain
terms and conditions, the power to grant ‘no objection’ under FEMA for creation
of charge on immovable assets, financial securities and issue of corporate or
personal guarantees, in favour of the overseas lender security trustee, to
secure the ECB to be raised by the borrower.

 

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